Sir Richard Sykes, Deputy Chairman and CEO, Glaxo Wellcome plc
GLOBAL ECONOMIC PRESSURES AND THE QUEST FOR NEW MEDICINES
Chairman: Julie Hannaford, President, The Empire Club of Canada
Head Table Guests
Bill Laidlaw, Director, Government Relations, Glaxo Wellcome and a Director, The Empire Club of Canada; Prof. Heather Munroe-Blum, Vice-President Research, University of Toronto; David Edmison, Director, Martin, Lucas & Seagram and Immediate Past President, The Empire Club of Canada; Dr. Francesco Bellini, President and CEO, BioChem Pharma; Paul Lucas, President, Glaxo Wellcome (Canada); Bob Dechert, Partner, Gowling, Strathy & Henderson, Director, The Empire Club of Canada and President, the British Canadian Chamber of Trade and Commerce; The Rev. Cameron Brett, Minister, St. Andrew's Presbyterian Church; Mike Strofolino, President and CEO, The Hospital for Sick Children; and AI Flood, Chairman and CEO, Canadian Imperial Bank of Commerce.
Introduction by Julie Hannaford
Exactly one week ago, on September 26, 1996, the Dean of the Richard Ivey School of Business, Lawrence Tapp, addressed The Empire Club. He spoke about the changes in the business education offered to students today, but also about the business of education that has come to also govern the growth and development of our professional schools. To the relief of the audience who heard Mr. Tapp's address, the term "paradigm shift" was never mentioned. In the business and management world, the concept of "paradigm shifting" has become associated with meaningless jargon, and more often than not, really translates as issue avoidance: when someone urges us to shift paradigms, usually, what they are now telling us to do, is to stop talking about the issue and move on to something else.
If shifting paradigms, translated into English as "changing the way we think" has meaning, it probably has the greatest meaning in the pharmaceutical industry, in particular, and in medical science in general.
Sir Richard Sykes addresses The Empire Club today not only as the Deputy Chairman and Chief Executive of Glaxo plc, but as the representative of an industry poised on the horizon of dramatic change, and critical challenge.
How we think of medicine is perhaps most dramatically illustrated by a quick tour of the highlights of the products introduced by Glaxo over the last 20 years. In 1978, Glaxo introduced Zinacef, an injectable antibiotic used for the prevention of infection during surgery. In 1991, Lacipil, a calcium blocker compound for the treatment of hypertension, was introduced. In 1991, Imigran and Imitrex were introduced for the treatment of migraine and cluster headache. In 1981, Zantac, perhaps the best known treatment for ulcers, was introduced. In 1987, Retrovir (also known as AZT) a treatment for AIDS, was introduced, and then, in 1995 Epivir, a further inhibitor for the treatment of AIDS, was introduced.
The above are representative of only a very small percentage of the pharmaceutical treatments introduced for the treatment and management of those illnesses which as recently as 20 years ago were regarded as untreatable, and/or unmanageable.
What does all this mean for the industry and for the issues being addressed by our guest today. It means that pharmaceutical science has changed the way we think of medicine today. Twenty years ago, patients would ask their physicians first whether a disease could be cured, and second, if the answer was in the negative, how it could be managed.
Today, largely because of the breakthroughs and dramatic developments taking place in science, patients (who are now significantly, known as consumers rather than patients) ask their physicians, not whether a cure exists, but how long it will be before the problem can be solved. As our population ages, the demand for solutions will become increasingly intense. That we as health-care consumers no longer accept chronicity or incurability, but instead expect medical science to produce solutions to previously insoluble problems, represents a true change in the way of thinking.
But at the same time, at least in Canada, this change in the way we think about science has developed concurrently with a change in the way in which we view health care. Health care, once a commodity that was purchased and delivered, is now part of the new set of rights available universally to each citizen. And, as health care becomes a right, rather than a commodity, and as that right is part of the fundamental set of rights available to each citizen, a countervailing pressure has developed to deliver both goods and services within the health-care field at a competitive cost.
The demand that medical science move forward at an increasingly high rate of speed, and the imperative that health-care services and goods be delivered universally and economically efficiently, are the two demands that configure the debate within the industry.
Our guest today addresses these issues from a background of academic achievement, research distinction, and extensive participation in the industry.
Born in 1942, he graduated at the University of London with a first class honours degree in microbiology. He obtained his doctorate in microbial biochemistry at Bristol University and his Doctor of Science degree from the University of London. He is a visiting Professor at both King's College, London and Bristol University; a Fleming Fellow at, Lincoln College, Oxford; and an Honorary Fellow of the Royal College of Physicians. He has received an Honorary Doctorate in Pharmacy from the University of Madrid; Honorary Doctor of Science degrees from Brunei University and the Universities of Bristol, Hertfordshire, Hull and Newcastle; and Honorary Doctor of Medicine from the University of Birmingham.
Sir Richard joined Glaxo Research in 1972 as Head of the Antibiotic Research Unit, a position he held for five years before taking up the appointment of Assistant Director, Department of Microbiology at The Squibb Institute for Medical Research. He became Director of Microbiology in 1979.
He then held the position of Associate Director of The Squibb Institute for four years and was made Vice-President, Infectious and Metabolic Diseases at The Squibb Institute in 1983, a position he held until 1986 when he re-joined Glaxo as Deputy Chief Executive of Glaxo Group Research Limited. He was appointed Group Research and Development Director, Glaxo plc and Chairman and Chief Executive of Glaxo Group Research Limited in 1987.
Sir Richard was appointed Deputy Chairman and Chief Executive of Glaxo plc in March 1993. Following the acquisition of Wellcome plc, Glaxo plc was renamed Glaxo Wellcome plc on May 1, 1995.
The issues that our guest will be addressing today affect us personally, politically, and economically. They do so now and they will in the future.
Please join me in welcoming our guest, Sir Richard Sykes, to The Empire Club of Canada today.
Ladies and gentlemen, I am delighted to have been invited to speak to you today about the quest for new medicines and the contribution that research-based pharmaceutical companies like Glaxo Wellcome can make to it.
Over the last two decades there have been enormous advances in a number of fields of science and technology, many of which have had an impact on the way in which human diseases are diagnosed and treated. The last few years have also seen very significant changes in the way that health care is delivered to our communities. Healthcare providers, whether public or private sector organisations, are only now coming to terms with some radical changes in the societies they serve. These changes will have had an impact not only upon the providers but also upon those industries such as the pharmaceutical and diagnostic industries which supply them.
The brand-name pharmaceutical industry is an international industry serving a global market. We must produce medicines for the world and be able to sell them to the world. It is also a market that is highly fragmented with many players and even Glaxo Wellcome, which is the largest company in the world industry, only has about five per cent of the market. This is why we have seen a process of merger and acquisition over the last few years and this will be a continuing feature in the years to come.
The brand-name pharmaceutical industry has a strong tradition in science and technology emerging originally from the chemical industry. It's an industry that has became successful because of the preparedness of the companies to invest very significantly in its R and D. The processes of drug discovery and development are costly and take many years before any return on investment is seen. Our success is therefore critically dependent upon what is done in our laboratories and also upon our ability to gain protection for our inventions through patents in the major territories of the world in which we must sell our products and services.
We must also be focused in our R and D, pursuing the central aim of finding significant new medicines for the common diseases of mankind.
The industry has also shown an ability to respond to a changing environment, firstly in the field of science with a move away from chemistry as the driving discipline, to the biological sciences, and most recently into biotechnology and the molecular and cellular sciences.
More recently the industry is having to adapt to major changes in the marketplace worldwide, leading to changes in the demand for our products.
In sophisticated societies like Canada, people have come to expect a high standard of health-care provision. To a large extent this is due to the success of the health services themselves and the efforts of the pharmaceutical industry. Over the last 40-50 years we have seen the virtual eradication of many life-threatening infectious diseases through the use of immunisation and effective antibiotic treatment. Polio, smallpox and tuberculosis are three such diseases. This has created the expectation that those responsible for our health services should be able to diagnose and treat the diseases of our time--the malignant and degenerative diseases--effectively. Patients therefore place greater demands on their healthcare providers and expect state-of-the-art facilities and investigations.
The most significant pressure, however, arises from demographic change. Again this is attributable to improved health care--the population of most developed nations is aging. A new spectrum of disease is emerging. Diseases of the elderly such as arthritis, senile dementia and Parkinson's disease are assuming greater prominence and are placing an increasing burden on the community. An inevitable consequence of this demographic trend is that there is a decreasing ratio of those who are earning compared with the retired, reducing the revenue available to fund public-sector health services. Unemployment is another factor putting pressure on social security budgets.
The political, economic and social climate in which we find ourselves is changing at an unprecedented pace. The challenge for the pharmaceutical company is to keep up with the changing patterns and respond to them effectively.
The rate of increase in costs of delivery of health care has forced health-care providers worldwide to seek to reduce their costs. Patented pharmaceuticals, though only 14 per cent of the overall Canadian health-care bill, are a target. This is putting pressure on the industry to seek new approaches.
What is emerging in the industry are two views of the way forward--investment in science and technology to create significant new medicines or investment in the means of provision of existing medicines to ensure continued revenue from old medicines. In Glaxo Wellcome we believe that the first view is the better one, both from the point of view of the development of the industry and also because there will be a virtual cessation in the advance of therapeutics into the difficult fields of medicine that now present our most formidable challenges, unless companies take this approach.
We must understand what the world of medicine--the patients, the doctors and the providers of funding for health care--is looking for from the industry. New drugs to cure, or at least modify, serious common diseases will only come from an approach to drug discovery which is based on understanding and rational design of novel molecules--a move away from "me too" medicines towards totally novel classes of medicines and therapies.
Therefore if it is to remain successful, the pharmaceutical industry must:
• concentrate on drug discovery for the major diseases;
• focus on understanding disease process;
• identify novel drug targets effectively; and
• maintain efficient processes for worldwide drug development and registration.
As a company, Glaxo Wellcome is strongly committed to fighting disease. That commitment naturally extends to the increasing diseases of the elderly, as well as established targets like cancer, AIDS and respiratory disease and older diseases like tuberculosis which are threatening to make a comeback as resistance to existing treatments builds up. Our commitment is graphically demonstrated by the fact that in 1996 we are investing 1.2 billion--or approximately $2.4 billion Canadian--in the research and development of new medicines. Within Canada itself we are spending some $50 million per year on R and D, about 13 per cent of sales revenue. Glaxo Wellcome research and development funding creates high-quality research positions at universities, hospitals and research facilities in Canada--Canadians developing and refining pharmaceutical products for use in this country and around the world. The largest of these projects is the Glaxo Heritage Research Institute at the University of Alberta that was established in 1992 and continues to be supported with more than $750,000 annually in operating grants.
The difficulties we face, and the major challenges that lie before us are, however, fortunately only one side of the picture. The other side is the unprecedented opportunities we now have, through harnessing science and technology, to understand disease processes and identify targets for therapeutic intervention which may produce cures.
The explosion of biological knowledge is giving us an understanding of the cellular and molecular basis of disease which means that we are now able to target our search for new treatments much more effectively than in the past.
Advances in electronics and computing have provided robotic methods of carrying out tasks many more times efficiently than was hitherto possible. This is opening the way to high throughput screening for drug discovery and even speeding up chemical syntheses.
Combinatorial chemistry, for example, enables us to identify new molecules much more efficiently and effectively than we could even a few years ago. In California, Affymax, now part of Glaxo Wellcome, has machines that can make 100,000 molecules in a single day, whereas a chemist might make one a week. That is an enormous productivity gain, a paradigm shift.
Let me briefly discuss some of the developments that are emerging from the human genome project--itself a product of the enormous expansion of our capability in molecular biology and biotechnology. Clearly this programme will lead to the development of methods for replacing or removing harmful genes in patients. But of potentially greater significance is the contribution it is going to make to the development of new medicines. The human genome project is an immense task of identifying, mapping and sequencing the 100,000 or so genes that make us what we are. Once these genes are identified and synthesised the next step is to discover their molecular products and define their function. Then we will have new insights into various diseases and see new ways of treating them. Through genetics we have come to understand the cellular and molecular basis of disease; a process we hope to repeat for other conditions.
Developments in information technology can also facilitate the delivery of cost-effective health care through disease management. A disease-management system is a communications network, involving those responsible for treating and monitoring the patients, which allows flow of data from the clinical centres--hospital clinics, wards and laboratories, GP offices and also pharmacies--into the data-management system of the disease-management supplier. The data will include diagnostic information, treatment regimes used, information on patient responses and compliance and any adverse reactions. All information input into the system is analysed and updated, and an outcomes analysis leading to a best-practice guide for the particular disease and patient type is fed back to the clinical centres. In addition, the doctors will be provided with up-to-date records concerning a particular patient. Thus the disease-management system is nothing more than the provision of access to the cumulative "wisdom" and practices of those handling the patient problems, and permitting this to be applied more widely in the most cost- and clinically effective manner.
In the case of asthma, for example, it is being found that by using disease management, expensive hospital admissions, particularly in emergencies, have been reduced, with the emphasis being moved to the primary health-care area. The extent of use of medicines in the moderate to severe patient groups has been reduced, with an increase in drug use in patients with the milder forms of the disease. Overall the cost of treating asthma effectively has been significantly reduced. Here in Canada, Glaxo Wellcome is supporting the formation of Community Asthma Care Centres in selected hospitals across the country. These Centres provide treatment, self-management skills and education support for asthmatics and their families.
From the few examples I have given, it is clear that there is enormous potential in science and technology to bring about improvements in the delivery of health care, the treatment of patients and the provision of better medicines.
However, effective delivery of health care requires the development of partnerships involving governments, the health-care professions, the academic scientific community and the pharmaceutical and other health-care industries. We must all be prepared to recognise each other's contribution and our mutual dependence.
The role of government is crucial, not least in creating an environment in which innovation is encouraged and rewarded. This is vital if the full potential of the exciting advances in science and technology which I have described is to be realised and if further such advances are to be made in future years.
Governments have a duty to foster innovation by ensuring that inventions receive proper patent protection. Many of the major advances in medicine in recent years have emerged from the laboratories of the pharmaceutical industry, but none of them would have happened if the companies concerned had not had the assurance of a limited period of market exclusivity before copy products became available. This is more important than ever today, as the costs of research and development continue to escalate.
Once a patent is established, it takes an average of 10 years and anywhere between $400 and $550 million to deliver a new pharmaceutical product to the market. Glaxo Wellcome, like other brand-name pharmaceutical companies, expects the standard 20-year patent protection offered all other products in the Canadian marketplace. The first 10 years are spent developing our products, leaving only 10 years of effective patent-protected sales. European countries, the United States and Japan offer 14 to 18 years of effective patent protection for pharmaceutical products.
Glaxo Wellcome is committed to a continuing strong presence in Canada but must be assured that policy support for the company's initiatives will be continuing. Canada needs to continue to provide a positive environment for pharmaceuticals. Without the 20-year patent protection available in just about every other developed country in the world, Canada can expect to fall behind in terms of investment in bricks and mortar as well as Canadian-based research and development of pharmaceutical products.
Linkage regulations were passed in conjunction with Bill C-91 and require generic companies to prove that they are not infringing upon the patent of a brand-name company before a Notice of Compliance is issued for the generic version of an innovative medicine. Linkage regulations are essential for effective patent protection, and every research-based company, including Glaxo Wellcome, will be forced to review its investment strategies should full 20-year protection disappear from Canada.
Efficient and effective approval processes are also critical to the successful launch of new medicines. In most countries, brand-name pharmaceutical companies can expect to wait a year or less for review and approval. In Canada, while there has been considerable improvement, it still takes 18 months for a new drug to be approved by the Health Protection Branch for sale in Canada.
But that is not the only waiting time for new medicines in this country. Each province then goes through a separate approval process to list new products on its formulary. Creating a more efficient approval process would benefit the patients, by speeding up access to new medicines, and reducing administrative costs for government and the industry. It would certainly make the 20-year patent-protection time-frame even more competitive internationally.
Strong patent protection and efficient approvals of new drugs are therefore essential components of the business framework within which pharmaceutical companies operate. But governments also participate more actively in the pharmaceutical marketplace, either directly as purchasers or more indirectly through their reimbursements to patients for the cost of their medicines.
This role inevitably gives governments a short-term interest in cost containment, which can conflict with its longer-term interest in the health of the research-based pharmaceutical industry. I am well aware of the need for governments to exercise restraint in their spending, but if the squeeze is applied too hard to the industry, research budgets will inevitably be reduced and much needed new treatments will take longer to arrive.
Like all brand-name pharmaceutical companies in Canada, Glaxo Wellcome has held the line on prices for its patented products, which increased a mere 2.1 per cent between 1987 and 1994. That is well below the rate of inflation. Patented medicines reflect only 2.4 per cent of health-care products and services costs.
Glaxo Wellcome has a major role to play in helping keep the costs of health care in check. This means we are working with doctors, hospitals and pharmacists on new, better and cost-effective ways to use medicines.
In June, Glaxo Wellcome launched an 18-month pilot Asthma Clinic at Centenary Health Centre in Scarborough. The clinic is focused on helping patients better understand and learn to control their asthma. The goal of the pilot is to reduce emergency visits and overnight care that currently accounts for hundreds of thousands of dollars in expense to Centenary each year. Better educated patients and cost savings will work hand-in-hand to save money. For Glaxo Wellcome, this is an opportunity to take an active role in improving health outcomes in patients.
Canadians are expecting health-care solutions, not a reduction in health-care services. Glaxo Wellcome is actively working with health-care providers to find and implement those solutions.
Next week Glaxo Wellcome will be officially announcing, along with Sunnybrook Health Science Centre, the Glaxo Wellcome/Sunnybrook Drug Safety Clinic. This clinic will diagnose, treat and conduct research on adverse drug reactions. Unique in Canada, the clinic would not be able to exist without a strong collaboration between the private and public sector. Again, the goal is to improve patient outcomes while creating opportunities to reduce health-care costs.
I believe that the advances in science and technology which I have described provide great opportunities for the pharmaceutical industry and government to work together to bring better and more cost-effective health care to people in Canada and throughout the world. Glaxo Wellcome looks forward to playing its full part in this vital task.
The appreciation of the meeting was expressed by Bill Laidlaw, Director, Government Relations, Glaxo Wellcome and a Director, The Empire Club of Canada.